U.S. Government Must Pick The Green Winners, Avoid Losers

Now that
the stimulus is passed, there's a pile of money waiting to be
doled out to many alternative energy companies. It's a good thing
the government is stepping in to give out money as the credit
markets are frozen and venture capital is scarce.

Yet many fear, with good reason, how the government will get the
money in the coffers of the *right* green tech companies and keep
it away from the *wrong* green tech companies. The government
will play the role of venture capitalist, in essence, picking
winners and losers. The government has a mixed track record
picking winners and losers, as
CNET points out:

"That's all possible. But even with 50 years of (picking winners
and losers), the system has produced the world's most advanced
submarines, rockets, and jet fighters," said Branko Terzic, a
former member of the Federal Energy Regulatory Commission who is
now an energy regulation expert at Deloitte Services.

Terzic's is at least the glass-half-full view. But leaving these
decisions up to government bureaucracies such as the Pentagon's
also has resulted in projects that busted their budgets, as well
as boondoggles like the development of the V-22 Osprey
helicopter.

People are wildly distrustful of the government when it comes to
allocating funds. There's lobbyists and a lifetime's worth of
bureaucratic mistakes to support the idea that government is bad
at spending money. While the government has failed many times, so
has private investment. Many venture capitalists invest in
companies that go bust. Many corporations burn money on research
and development that goes nowhere. So, while it's unnerving to
see the government pick the right green tech companies, it's no
more unsettling than when private investors do the same. It
probably feels different because it is our money.

There's another reason people fear government giving out money,
which we alluded to in the last paragraph: lobbying. Bigger
companies can influence decisions with ease, while small
companies don't have the same pull, which is a concern for clean
tech investing:

CNET: "We certainly have a game plan, but it's quite unclear
how that funding will end up in the hands of small businesses
like ours," said Bionavitas' Weaver, whose company invented a way
to improve the economics of algae farming. "There's a well-known
track for getting money from government into industry, but
unfortunately, that track usually means it goes to the largest
players."

Weaver and other green-tech start-ups say they are wary of the
recent history of Energy Department grants, fearing that if past
is prologue, the bigger companies will be able to take advantage
of years-long relationships with the government to make sure they
are first in line to get stimulus monies.

"Frankly, that's my concern," said David Grieger, the CEO of
VU1, a company that has
invented an energy-efficient lightbulb that doesn't use mercury.
"They have made a lot of statements that, in order to get the
money out the door quickly, they will have to get it into
existing organizations. If that's the case, that can't be good
news for the companies that don't have a pre-existing
relationship (with the government)."